Banks offer more incentives for credit card users
by Linette Lim 04:45 AM May 02, 2012SINGAPORE -
Credit card issuers in Singapore are raising the bar in the race to attract more subscribers. Among the latest offerings are credit cards that automatically convert purchases into more affordable monthly instalments.
Banks hope that this will help raise the level of spending by cardholders and potentially raise their income levels in an already saturated credit card market.
OCBC, for instance, is offering card users the option of an inbuilt interest-free instalment plan with its Cashflo card. Its head of group lifestyle financing, Mr Desmond Tan, said: "Customers want to know how a credit card tool can help them control their finances on a monthly basis ... Let's say my auto-insurance is S$2,500. The moment I use this card to pay, I automatically break the amount into instalments over six months."
According to OCBC, the Cashflo card has seen application numbers reach the "low thousands" within a week of its launch. That is six to seven times the usual application rate for a regular credit card.
OCBC says it is seeking to grow its credit card business by 30 per cent this year.
"With the insights we have gained, coupled with the initial results that we are seeing, we intend to grow aggressively this year. So if the market is sizing up to grow by17 to 21 per cent this year for credit card spending, I think we are easily aiming to double that," said Mr Tan.
Other banks like DBS and Citibank also offer their cardholders the choice to convert their purchases to a monthly instalment plan.
Banks have also been enticing cardholders with perks like cash rebates and dining privileges for years. Citibank says this strategy has paid off.
Ms Jacquelyn Tan, business director of credit payment products at Citibank Singapore, said: "We have more than 50 per cent market share in terms of card customers here ... And we have seen that on year, customers that engage with our rewards and loyalty programme have shown an increase of close to 20 per cent in terms of sales."
With growth in new credit card accounts falling to 0.26 per cent last year based on data from Credit Bureau (Singapore) (CBS), banks in Singapore want cardholders to swipe their plastics more.
CBS executive director William Lim said: "We are looking at a pretty saturated market in terms of credit card penetration, so the growth is likely to be this way if you look at the number of new people being eligible for credit facilities - there's a limit to that."
Despite the temptation offered by more credit lines, CBS says default rates in Singapore have actually been falling. Its figures show that the delinquency rate here fell to 4.73 per cent last year, down from 5.04 per cent the previous year.
The default rate was 0.12 per cent last year, down from 0.14 per cent in 2010.
"The default and delinquency rate that we're having now is very low and still falling. The possible reasons are, we believe, the healthy economy and the full employment status in Singapore over the last couple of years," said Mr Lim.
